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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: carranza2 who wrote (157758)	5/12/2020 9:19:45 AM
From: TobagoJack	Respond to of 217495

From Him, ask-socrates.com Blog Neither a Borrower Nor a Lender Be QUESTION: Dear Mr Armstrong, My deepest gratitude for what you do. You have been warning us against emerging market debt, especially government debt, so I have a question: I have the opportunity to buy 3-year USD-nominated bonds from one of the largest banks in Georgia (the country) with a coupon of 8%. The bank is listed in the UK and has very solid financials, no EU-related assets in their balance sheet. This is senior corporate (bank) unsecured debt in a private placement, and the offering is quite small, they want to raise about USD 10 million total. Would you think that is too risky ? Thank you, J ANSWER: The tremendous risk that we face with debt defaults going into 2022 introduces tremendous risk. Last August in the midst of the Repo Crisis, the largest U.S. bank by assets, JPMorgan Chase & Co, lowered its prime rate, a benchmark for a wide range of consumer and commercial loans, for the first time in more than a decade. That followed the rate cut from the Federal Reserve which began on August 1st, 2019. The bank’s prime rate was lowered by 25 basis points to 5.25%. That was actually on target for you see that we had a Directional Change in 2019. The turning point thereafter was 2020 and note that this was the strongest target on the top aggregate line. This implies that 2020 is a cycle LOW from which rates will rise as the Sovereign Debt Crisis starts to now unfold on target going into 2022. Note that volatility will be rising sharply into 2022. The end-game here for the rise in interest rates will be 2024 which is the peak of the ECM. Do not confuse this trend in REAL interest rates with the ficticous trend in official interest rates on government debt set by the central banks. I know there are now conspiracy claims that Trump has usurped the Federal Reserve. My point is clear - even if the wildest of conspiracy theories were TRUE, so what! The Fed does not and cannot control interest rates in the free market. Real Rates are rising and the Fed can have rates at zero, but that has NO impact on real loan rates. Try getting a loan from any bank and say since the Fed is at ZERO, I will pay you 1% which is doubling your money. I am sure you will see how the bankers appreciate your humor. The key level will be 6.5% on the Prime Rate. After the Federal Reserve responded to the worsening coronavirus crisis by slashing interest rates one full percentage point to near zero on March 15, major banks led by Chase and M&T lowered the prime in similar fashion, from 4.25% to 3.25%. Thius will prove to be a cycle low. Bank have pulled back in the mortgage market already. A credit score as low as 580 was good enough for a mortgage at the start of 2020. That has now vanished and banks are making the floor already with a FICO credit score of at least a 660 for the same loan. "Neither a Borrower Nor a Lender Be" This is a famous phrase said by Polonius in Act-I, Scene-III of William Shakespeare's play, Hamlet. At this stage, borrowers should do so ONLY at a fixed rate. Lenders should ABANDON all fixed loans and NEVER lend to any government ort even a bank. Corporate debt which is AAA would be the only acceptable instrument. You might want to consider preferred shares in AAA corps.

To: carranza2 who wrote (157758)	5/12/2020 9:48:59 AM
From: TobagoJack	1 Recommendation Recommended By maceng2 Read Replies (2) \| Respond to of 217495

good news I guess, that inflation is down, leaving room for more printing, so to dilute the stock / reservoir, in favour of the flow, GDP / river By such a a protocol, we must strive to hold on to 'undilutables', and gather sponges of the flow, equities, and so Martin's scenario plays out, the rise of stocks and gold / silver / etc etc let others quaintly wait for rising interest rate on bonds zerohedge.com Core CPI Crashes By Most On Record; Food Costs Soar As Energy & Apparel Collapse Headline Consumer Prices fell 0.8% MoM - the biggest drop since 2008 - as soaring food inflation was dominated by plunging energy, apparel, and lodging costs... But it was Core CPI, printing 0.4% MoM that made the headlines. That is the biggest monthly decline since records began in 1961... Under the hood, the changes were dramatic to say the least... A 20.6-percent decline in the gasoline index was the largest contributor to the monthly decrease in the seasonally adjusted all items index, but the indexes for apparel, motor vehicle insurance, airline fares, and lodging away from home all fell sharply as well. Goods deflation is accelerating as Services inflation is slumping... In contrast, food indexes rose in April, with the index for food at home posting its largest monthly increase since February 1974. Shelter Inflation up only 2.61%, down from 3.01% in March, and the lowest since Feb 2014. Rent inflation up 3.49%, down from 3.67% in March but lowest only since Jan 2019. Given the near total lockdown of the US, we do question just how "real" this data is (and the fact that rent strikes, mortgage forbearance, food banks, UBI, PPP, and you name the acronym have distorted all the inputs).

To: carranza2 who wrote (157758)	5/12/2020 1:42:06 PM
From: TobagoJack	Read Replies (1) \| Respond to of 217495

Something relevant to DRD in my in-tray On May 12, 2020, at 6:49 PM, J wrote: Thank you for that catchup. On May 12, 2020, at 6:26 PM, H wrote: Yes, today's DRD is not comparable to its year 2000 incarnation. Keep in mind that the old management issued truckloads of shares over the years, inter alia to pay for ill-fated acquisitions (a 50% stake in Porgera for example that immediately went south when a pit wall collapsed). So at the beginning of the rally in 2000 - 2002, the share float was very small, which explains why it went up so much at the time. The other part of the explanation is that the ratio of HUI or XAU to gold soared from 17 or so to more than 60 - people were prepared to pay for "gold price optionality", of which DRD seemed to offer plenty with the stable of high cost underground mines it ran at the time (consisting mainly of Hartebeesfontein, Buffelsfontein, Blyvooruitzigt and ERPM - plus they owned a few old mines that had been closed many years earlier, but were considered potential reopening candidates). The surface treatment operations were basically an afterthought at the time. The management was not very good, but it was also dogged by really bad luck - Harties and Buffels had to be closed after an underground quake buggered their deep level infrastructure and they became unsafe to operate. Then the Porgera pit wall problem struck - so more than half of the company's assets basically went up in smoke with no compensation. The new management has completely transformed DRD into a specialist for surface treatment, which they have gotten really good at (no other surface treatment operation is capable of making money at the grades they are "mining" at ERGO). They decided to completely ditch underground mining, which was a wise move (it generated more headaches than profits, that much was certain). DRD has been paying dividends every year since the transformation was accomplished. Right now it enjoys huge margins, has zero debt, a huge chunk of cash on the balance sheet and prospects for growing production substantially in coming years, as it gradually takes over all of Sibanye's surface assets. I reckon DRD will also consider taking over other surface treatment operations if an opportunity presents itself. Pan African (unfortunately not listed in the US) is a mixed surface/underground operation that would be a great fit - would be great if they could take them over and spin out the underground assets. But that is just my idea, I don't know if they have ever considered it. Probably not, as they will have their hands full with the FWRG phase 2 expansion. On Sun, May 10, 2020 at 3:41 PM G wrote: schrts.co last major high in 2002 following the money printing that started in 2000.. from 4.59 to 38.54 on the closings. one could say the share price along with all of the miners are trailing the price of gold hugely. DRD's business model is far safer than it was back 20 years ago one might say it was a completely different company in the end.

To: carranza2 who wrote (157758)	5/13/2020 2:40:15 PM
From: TobagoJack	Respond to of 217495

I do not as a habit swear ... much, but, those plucking pucks, serve them right bloomberg.com HSBC Lost About $200 Million in One Day on Gold Market Turmoil Jack Farchy HSBC Holdings Plc lost around $200 million in one day in March because of disruptions to the gold market that caused prices to diverge dramatically in key trading hubs, according to a filing by the bank. The one-day loss was unusually large for a market in which the leading banks -- which include HSBC and JPMorgan Chase & Co. -- typically hopeto make around $200 million in an entire year. It far exceeded the maximum loss anticipated by HSBC’s value-at-risk models. HSBC’s loss highlights the extreme nature of the disruption to the gold market in late March, as lockdowns closed refineries and grounded planes, strangling the supply routes that allow physical bullion to move around the globe. The price of gold futures in New York and spot gold in London, which usually trade within a few dollars an ounce of one another, diverged by as much as $70 -- the most in four decades. The divergence hit banks that are active in trading the so-called EFP, or Exchange for Physical, the mechanism by which traders switch positions between the New York and London markets. HSBC, which had disclosed in a previous filing that it was hit by the gold market disruption, revealed the scale of the loss in a chart this week showing its daily trading profits for the first quarter. The bank described the loss as a “mark-to-market loss mainly associated with gold refining and transportation challenges.” It highlighted the “unprecedented widening of the gold exchange-for-physical basis,” which “affected HSBC’s gold leasing and financing business and other gold hedging activity leading to mark-to-market losses.” HSBC declined to comment. In the past week, the price difference between the New York and London markets has returned to more normal levels of less than $5 an ounce. Still, HSBC is not the only one struggling with the unusual moves in the gold market. Banks often sell gold futures in New York to hedge their positions in the London market, exposing them to significant losses should the two markets diverge. As a result, some banks have stepped back from trading the EFP in recent weeks. And Canada’s Bank of Nova Scotia, for years one of the leading bullion traders with a business that dates back to the 17th century, told staff in April it was shuttering its precious metals unit. Before it's here, it's on the Bloomberg Terminal. LEARN MORE Sent from my iPad

To: carranza2 who wrote (157758)	5/13/2020 3:00:18 PM
From: TobagoJack	Respond to of 217495

Re DRD On May 13, 2020, at 8:50 PM, J wrote: Agree on items (1) and (2) by casual scan of local media where I am, as to (3) I thank you for the admonition and shall watch out for signs. Not immediately worried as the virus does its work. Best, J On May 13, 2020, at 8:37 PM, H wrote: It should be noted: relative to the total SBSW portfolio, DRD is a relatively small part - the 50% stake is now worth slightly more than USD 400 million, and SBSW has a 7.75 billion market cap - but DRD promises to grow in importance as it expands its operations in coming years. As to the risks, let me quickly tick them off: 1. political risk: this concerns mainly the frequent tinkering of the government with the SA mining charter. Luckily Ramaphosa seems to be good at putting the brakes on excesses - he sometimes comes off as a typical lefty ANC populist in his public pronouncements, but in reality he seems intent on preserving a market economy. The guy has been a trade union leader (in fact, he presided over the National Union of Mineworkers in the late 1980s/early 1990s), a successful businessman and now he somehow made it to top dog on the political totem pole, so we can safely assume he's no dummy. Still, the risk is not zero, but it is not as big a concern as it is sometimes made out to be. 2. electricity supply: this is a real pain in the behind for every mining operation in SA. Eskom is a textbook example of socialist failure. Governments just cannot run a business, and Eskom has been run into the ground. Reform efforts are underway, but the process is an arduous one so far. The mines are beginning to take their own countermeasures in parallel (they plan to build dedicated power plants for themselves - but they still require official approval. My bet is they are going to get it, as the Eskom monopoly has been killed earlier this year). 3. the Rand - the weak ZAR has been a great boon for SA gold miners over the past year. I attach a chart from an article I posted in H2 2015 - The Canary in the Gold Mine- in which I discussed the fact that SA mining shares tend to lead at major lows for the sector. The chart shows what happened in 2000 - 2002. The Rand gold price rose first - just as it did this time around. When the Rand gold price peaked, the USD gold price played catch-up. Despite the fact that gold went sideways in Rand terms, the major SA gold stocks at the time still tripled in USD terms. But that was it. From that point onward, the strong Rand became a huge drag on their share prices, and they switched from being outperformers to underperforming the sector for several years. In short: once the Rand begins to strengthen, there is a good chance they will continue to rally as long as USD gold prices continue to go up, but they will be on borrowed time and one has to move on to other stocks in the sector before the markets begin to worry about excessive Rand strength. On Wed, May 13, 2020 at 7:43 AM J wrote: Would be grateful. I myself shall try best to give a look to issue of relative-value between DRD and SBSW holdings in DRD. On 13 May 2020, at 7:13 AM, H wrote: That is highly unlikely. Sibanye entered into the deal with DRD for the explicit reason that it wanted its surface assets to be brought to account and operated by an independent entity, which leaves SBSW management free to focus on its already complex & sprawling portfolio of underground gold and PGM mines. It has the last word as the majority owner, but actually does not interfere in management of DRD. I will have more to say later (I'm about to go to sleep now). In particular I want to discuss what the risks are. The current incarnation of DRD is luckily the least risky and most consistently profitable it has ever been, and the risks are therefore fairly straightforward - but they clearly do exist (one only has to look at the ups and downs in the stock since 2015 - currently the market loves it, but it has hated it in the not-too-distant past despite its strong prospects). On Wed, May 13, 2020 at 12:11 AM G wrote: Why, all things considered, would their 50.1 percent shareholder not offer to buy them out now. which would remove any bet based upon DRD as a stand alone. and hence change the picture relative to the merged company at that point, and all all of the other basis points. and why are they not doing just that? this question seems quite worth asking on the top of the list of the other questions. On May 12, 2020, at 10:23 PM, G wrote: we've seen huge shit happen in markets over the last 11 years including amazing grabs at yield for the worst things offered on planet earth with the highest possible risks. And YET: just a few months ago as the crow flies, DRD which then had a 5% yield or higher, was trading at 2 and 3 dollars per share. WTF? nobody wanted to buy a going concern with a great game plan, great balance sheet, no debt, money in the bank and all the rest? HOW IS THAT? people were scouring the planet for yield and they did not buy this company? The starting point for DRD in the so called new gold bull should not have been, even w/o a bull, at least twice what it was trading at just months ago at the gold lows for the move, simply on the basis of the other dynamics going on for the last 11 years. How is that? Fuckers were scouring the planet with the yield radars, overhead sensors, and god knows what, and bought shit like junk (now being rescued, and all the rest) and they didn't buy DRD? How is that????????????????????????????????????????????????????????????????????????? What are we missing, OR, what are we getting right and need to get even more right before they do? Please weigh in if there's something constructive to add...soon LOL. everything is at a pivot point on all things. you can smell it. something is going to start happening anytime between now and soon. the tape says so.

To: carranza2 who wrote (157758)	5/14/2020 2:46:43 AM
From: TobagoJack	Respond to of 217495

More DRD On 13 May 2020, at 8:50 PM, H wrote: There is one more DRD-specific risk - it seems remote at the moment, but it is also not zero: someone might try to head-hunt their CEO (Niel Pretorius) away. This guy has been crucially important in the effort to finally right the ship after years of wasted opportunities and mismanagement. I think if not for him getting the job as CEO, DRD would probably not exist anymore. And funny enough, when he started out at the company he was quite inexperienced - but he was prepared to slaughter sacred cows and focus exclusively on the parts of the business that were able to generate profits. The sacred cows were all the underground assets. And now DRD is not only wildly profitable and owner of the cleanest balance sheet of the entire industry (debt level: zero), he is now selling it as a "green company", which makes it attractive to all the institutional investors who suddenly need to virtue signal / greenwash their activities or are even laboring under statutory mandates to invest according to "ESG" standards. So a European pension fund might say "we can no longer invest in mining companies", but DRD tells them "you actually can".